Thursday, March 30, 2017

Silk roads and chilled beef: how China is trying to fill a Trump vacuum in Australia

http://mobile.reuters.com/article/idUSKBN1700KN

By Jane Wardell and Jonathan Barrett | SYDNEY

It was almost a major faux pas in sports-mad Australia - Chinese Premier Li Keqiang arrived at an Australian Rules football match in Sydney wearing the blue, black and white scarf of interstate rival Port Adelaide Power.

But Li quickly donned a red and white scarf of the hometown Sydney Swans to match that of his host, Australian Prime Minister Malcolm Turnbull.

Li later confessed wearing both team scarves on a balmy autumn evening made him "really hot", but the broad smiles of the two leaders provided a telling contrast to a bad-tempered telephone call between Turnbull and a freshly-elected Donald Trump that made international headlines.

Australia and China found unprecedented common ground on trade during Li's recent five-day visit Down Under, with a clear agenda of rejecting the "America First" protectionism touted by the new U.S. president.

"The cooperation between China and Australia showcases to the region and the world our determination to defend trade liberalization and advocate the benefits of free trade," Turnbull told business leaders and politicians at a forum in Sydney, in comments closely echoed by Li.

But growing trade ties are only one side of a delicate super-power balancing act for Australia, whose unshakeable security relationship with the United States and Western democratic values have limited how cozy it gets with China.

Li, well aware of Australia's reliance on China for its economic future, used his visit to caution Australia against "taking sides, as happened during the Cold War."

And while Turnbull was quick to say "the idea that Australia has to choose between China and the United States is not correct", some analysts disagree.

"The problem Australia faces is the growing tensions from China's desire for influence and that is going to mean Australia may have to choose between its two allies," said Nick Bisley, professor of international relations at Melbourne's La Trobe University.

TRADING UP

After decades of relative peace and economic growth, the Australian public appears to be slowly shifting its allegiance to China. Asked whether China or the United States was more important to Australia, respondents to a Lowy Institute poll were deadlocked - a shift from responses in favor of the United States when the same question was asked two years earlier.

ADVERTISEMENT

Trump pulled down the U.S. shutters on trade early in his presidency, withdrawing the United States from the Trans-Pacific Partnership, a 12-member trade agreement that excluded China and was instrumental in the U.S. "pivot to Asia".

Li came to Australia bearing a valuable gift to help fill that vacuum; the removal of restrictions on chilled beef exports.

"We've made it a priority to get access for agricultural products into China," an Australian government source told Reuters. "Getting access to China for agricultural products can take years but as they get hold of more and more produce and they appreciate the quality, that opens the door for access for additional products."

China bought A$150 billion ($114 billion) of Australian goods and services last year - easily its biggest trade partner.

But juggling its trade and security interests will be no easy feat for Australia.

The country's military and economic priorities collide in the under-developed but strategically important north. A new rotation of U.S. marines is due to arrive shortly at a joint Australia-U.S. base in Darwin that is a jump-off point for surveillance of the contested South China Sea.

While Australia has so far resisted calls to participate in U.S.-led freedom of navigation exercises in the strategic waterway, it has firmly reinforced its security alliance with the United States as part of the Five Eyes intelligence network.

But the north is also where Australia is seeking major infrastructure and industry investment, potentially through pulling the region into China's One Belt One Road (OBOR) initiative.

China has been pressing Australia to sign up for OBOR, its signature foreign and economic policy, and while the pair did not reach agreement during Li's visit, industry experts believe that won't be too far away.

"We want to be part of that supply chain," said Lyon, referring to Australian companies pitching for construction, finance and engineering contracts on the Silk Road.

INVESTMENT AND EXTRADITION

There are other roadblocks in the way of deepening Sino-Australia relations.

Just two days after Li had left Australia and facing an embarrassing defeat, Turnbull pulled a vote in parliament to finally ratify an extradition treaty with China, 10 years after it was signed.

Foreign Minister Julie Bishop held an emergency meeting with the Chinese ambassador to try smooth over Australia's failure to join France and Spain as the only Western countries to enter into such a pact, but no revised date has been set for the vote.

"High-level visits are measured by deliverables so there would have been interest from the Chinese in having the extradition treaty ratified around the time of the visit," said Euan Graham, director of the national security program at the Lowy Institute, an Australian think-tank.

"The visit seems to have been very successful on the economic merits but this inability to ratify the extradition treaty will inevitably lead to a sense of deflation."

And delegates at a large China-Australia business forum said much of the discussion on the sidelines was about Australia's conflicted approach on Chinese investment.

Canberra has talked up the need for offshore funding, but described China-led bids for privatized assets as a security risk. The rejection of high profile bids from Chinese state-owned investors in electricity network Ausgrid and cattle empire S. Kidman and Co still rankle in Beijing.

"There will come a day when the Chinese investors ask why we're to going to Australia in the first place," said Zha Daojiong, an international studies professor at Peking University. "Australia are making a judgment on politics not economic or technical factors."

(Additional reporting by Colin Packham in SYDNEY and Philip Wen in BEIJING; Editing by Lincoln Feast